CAIRO (Reuters) - Egypt's central bank will hold its largest exceptional auction on Wednesday, selling $1.3 billion from its foreign reserves to cover strategic imports such as wheat, meat and cooking oil, it said in a statement.

The auction is significantly larger than the $40 million auction Egypt holds three times a week, and larger than the $800 million it offered at its last exceptional auction in May.

The most populous Arab nation is grappling with an economic crisis caused by more than two years of political instability after the overthrow of Hosni Mubarak in 2011, followed by a turbulent year under Islamist President Mohamed Mursi.

After the army ousted Mursi on July 3 in the wake of mass protests, the interim government not only launched a violent crackdown on his Muslim Brotherhood in which hundreds were killed but also imposed a state of emergency and a curfew, which is hurting business.

Continued protests by Islamists calling for Mursi's reinstatement, as well as militant attacks in the lawless Sinai Peninsula, have also helped to prevent a return to normality, and kept away the tourists who drive a large part of the economy.

"With the current security situation and curfew restrictions, people cannot handle missing basic commodities as well," said one banker following the foreign exchange market.

"It's a way to reassure the people."

The auctions first started during Mursi's time in office when foreign reserves dipped to a critical low, below the $15 billion needed to cover three months of imports, as they were used to support the pound while tourists and investors took their foreign currency elsewhere.

They have since jumped to $18.88 billion in July, boosted by $5 billion quickly sent by Gulf Arab states opposed to the Brotherhood after the army removed Mursi. Saudi Arabia, Kuwait and the United Arab Emirates have pledged $12 billion in total to support Egypt since July 3.